Budget Autumn 2017 Pension Tax Relief

RickyB2000

Force the older doctors to retire and replace them with two junior doctors on vastly inferior salary and pension. Ensure if they follow the exact same career path as the retiree they will get less in both pay rises and pension benefits. Basically get rid of those on old generous contracts and replace with people on new cheap contracts (in principle). Makes sense to me. Lovely and cheap.

Anonymous101

resk wrote: »

How would a reduction or removal of pension tax relief work? Currently my employee pension contributions are deducted from my gross pay before any tax is taken off. In other words, the income tax and NI is calculated on the adjusted (reduced) salary, so my tax relief is automatic. Would this entire system be stopped?

I've been thinking the same. Salary sacrifice scheme's would such as these would surely have to change? :money:

Anonymous101

RickyB2000 wrote: »

Force the older doctors to retire and replace them with two junior doctors on vastly inferior salary and pension. Ensure if they follow the exact same career path as the retiree they will get less in both pay rises and pension benefits. Basically get rid of those on old generous contracts and replace with people on new cheap contracts (in principle). Makes sense to me. Lovely and cheap.

I can't quite work out if your post is serious or tongue in cheek.... if its serious surely people intelligent enough to become doctors would be able to work out that other career paths are suddenly much more appealing financially and choose those instead? The result would be a drop in the standard of doctors.

AlanP_2

Triumph13 wrote: »

I hope that's a typo and not inside knowledge of what's coming in the budget!

Ah, slight typo there, thanks - 20%.


Original Post edited to correct.

lisyloo

Currently my employee pension contributions are deducted from my gross pay before any tax is taken off.

That's called salary sacrifice.
The government can AXE salary salary if they wish (they did axe some in 2016 e.g. company cars, mobile contracts).

They could axe it so that you lose the NI benefits of salary sacrifice but still maintain the tax relief.

lisyloo

Force the older doctors to retire and replace them with two junior doctors on vastly inferior salary and pension.

Again, difficult to tell if you're being sarcastic or playing devils advocat (nowt wrong with that).
I have no issues with axeing gold plated salaries or pensions schemes where appropriate however you can't just pluck qualified doctors out of thin air. We have recruitment crises in certain areas of the NHS which will get worse if we make it less appealing for immigrants to be here.
I believe 1 in 10 GPs are already immigrants.
I'd like to see up invest more in training young people but that requires investment and long term planning, something we all agree is often set aside in favour of shorter term aims.

zagfles

resk wrote: »

How would a reduction or removal of pension tax relief work? Currently my employee pension contributions are deducted from my gross pay before any tax is taken off. In other words, the income tax and NI is calculated on the adjusted (reduced) salary, so my tax relief is automatic. Would this entire system be stopped?

That's the big question, and probably why it hasn't been done despite similar being done in lots of other areas.

Basically employee pension contributons would have to be deducted after tax not before, and employer pension contributions would have to become a taxable BIK (benefit in kind), like company cars etc. Then the govt could top up pension conts with a flat rate relief/bonus like the LISA.

Where it gets very messy is with DB schemes especially final salary. If the BIK was valued in the same way as it is for the annual allowance, it could mean a massive tax bill when someone gets a payrise.

Triumph13

If you want a more sensible way to handle pensions, how about this. Scrap the LTA as it currently exists. Introduce a limit for TFLS, but reduce this TFLS limit for those with total pots valued over £1M such that, if you put an extra £100k into your pension, that reduces your lump sum allowance by £100k. That makes further contributions tax neutral for someone who would be 40% in employment but 20% in retirement. Value DB schemes for this purpose at a more sensible rate of 30x benefit rather than 20.
Such an arrangement allows your doctor to keep accruing DB pension without any 'punitive' tax charges, but discourages them from making additional savings in a SIPP to fund early retirement!

madeinireland_2

marlot wrote: »

Its a large part of the reason I'm stopping next year. There doesn't seem much point working beyond 55 if I'm already over the LTA.

I'm not a GP but this is exactly why I retired in August this year!

zagfles

Triumph13 wrote: »

If you want a more sensible way to handle pensions, how about this. Scrap the LTA as it currently exists. Introduce a limit for TFLS, but reduce this TFLS limit for those with total pots valued over £1M such that, if you put an extra £100k into your pension, that reduces your lump sum allowance by £20k.

That wouldn't be tax neutral unless I've misunderstood.

Extra £100k in, £40k tax relief.

On the way out, the £100k taxed at 20% (£20k), plus £20k less TFLS so an extra 20% tax on that £20k (so £4k), so £24k tax total on way out.

So it'd be 40% in and 24% out.

That makes further contributions tax neutral for someone who would be 40% in employment but 20% in retirement.

No, the current system is tax neutral for such a person. 25% LTA charge and 20% income tax compounds to 40% tax on the way out.

The LTA only really punishes those who pay 40% tax in retirement, or theoretically those who are basic rate taxpayers both in employment and retirement.